using xbrl global data - the cfo perspective
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eXtensible Business Reporting Language “XBRL”
SEC Filings Using XBRL
“A CFO’s Perspective”“A CFO’s Perspective”
Greg Adams, CFO & COOGreg Adams, CFO & COO
EDGAR Online, Inc.
SEC Filings Using XBRL:
Corporate Pressures SEC’s Voluntary Filing ProgramFinancial Reporting Process & XBRLSample Form 8-K Filing Benefits of XBRL to Information Consumers
Financial Executives
Have a critical responsibility to communicate operational results to stakeholders
Are facing a growing demand for efficient delivery in an interactive medium
Need better tools for faster decision making
Want their internal control environment enhanced through less retyping, more system integration, etc.
Dwindling Coverage
Number of stocks followed by some Wall Street firms at the end of 2000 and 2003
Firm 2000 2003 Merrill Lynch 3,500 2,469 CSFB 3,077 2,373 Smith Barney 3,000 2,300 J.P. Morgan Chase 2,400 2,260 Goldman Sachs2,315 1,950 Morgan Stanley 2,150 1,925 Lehman Brothers 1,650 1,605
Source: WSJ Research; Includes both U.S. and abroad.
18% reduction
SEC Voluntary Reporting Program
“The annual report of the 21st century will not be annual and it will not be a report: it will be
an up to date, informative dialogue”
- Alan Benjamin in the 21st Century Annual Report
XBRL Value Proposition
Transparency and the U.S. Securities and Exchange Commission (SEC)
ShareholderView to
Business Events
Accounting Practices
Control Practices
People Practices
The SEC is driving for reporting transparency. In many organizations, each step along the path to the final external reports clouds the view of information back to the original business event (inconsistent account definitions, incomplete GL reconciliation's, management adjustments, top side entries, etc.)
BusinessEvents
Mgmt Reports
BusinessEvents
BusinessEvents
BusinessEvents
BusinessEvents
BusinessEvents
External Reports
Financial Systems
Financial Systems
How linked to XBRL initiative?
Move towards transparency If items were tagged and identified more information could be
made available for investors and analysts to analyze in the manner that chose to do so
Enhances information acquisition, evaluation and combination
Improves transparency without additional disclosures
Newfound discovery capabilities
Can benefit nonprofessional users
[Release Nos. 33-8496, 34-50453, 35-27894, 39-2498, IC-26622; File Number S7-35-04]
XBRL VOLUNTARY FINANCIAL REPORTING PROGRAM ON THE EDGAR SYSTEM
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
SUMMARY: We are proposing rule amendments to enable registrants to submit voluntarily supplemental tagged financial information using the eXtensible Business Reporting Language (XBRL) format as exhibits to specified EDGAR filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940. Registrants choosing to participate in the voluntary program, expected to begin in early 2005, also would continue to file their financial information in HTML or ASCII format, as currently required. The voluntary program is intended to help us evaluate the usefulness of data tagging in general, and XBRL in particular, to registrants, investors, the Commission and the marketplace generally. A companion concept release also being issued today provides additional information on tagged data and solicits comment on the development of data tagging.
BACKGROUND: All registrants who file with the Commission are now generally required to file electronically on the Commission's Electronic Data Gathering, Analysis and Retrieval System ("EDGAR")……
As discussed in the accompanying concept release, we are evaluating whether tagged data in Commission filings would provide a better means to provide and obtain necessary information and, if so, whether we should permit or require XBRL tagged data in Commission filings.22 The Division of Corporation Finance, Office of the Chief Accountant, Division of Investment Management, and Office of Information Technology have formed a task force to assess the implications of tagged data for filers, investors, the Commission and other market participants.23 In order to test and evaluate data tagging, we propose to allow registrants to supplement their Commission filings by furnishing financial data on EDGAR as an exhibit using eXtensible Business Reporting Language ("XBRL"), beginning with the 2004 calendar year-end reporting season. We currently expect to permit participation by any registrant without pre-approval merely by submitting the exhibit in the required manner.
Effective Date: March 16, 2005 “The voluntary program is intended to help us evaluate the usefulness of data tagging and XBRL to registrants, investors, the Commission and the marketplace”.…
SEC commenced the voluntary program for receiving financial information on EDGAR using XBRL in early April 2005 Approved Taxonomies (classification systems) for commercial and industrial
companies, banking and savings institutions, and insurance companies.
In August 2005, SEC Extends Voluntary Program to Investment Companies The expansion will allow mutual funds to file exhibits to their annual report to
shareholders (N-CSR) and quarterly statement of portfolio holdings (N-Q) in XBRL
SEC believes “tagged data will improved the quality of information and speed of its availability” Will help the Commission determine whether these improvements will
empower individual investors to get information faster and more conveniently and to choose more wisely by making better-informed comparisons.
XBRL Voluntary Filing and FAQs
SEC Voluntary Reporting Program
Allows companies to “furnish” XBRL tagged financial statements
Added Rule 401 to Regulation S-T allowing filers to furnish supplemental information using XBRL
Allows for company flexibility in filing financial statements, with or without footnotes and MD&A
Can submit XBRL tagged document either with the official filing or as an amendment, however, there is no submission deadline
Must correlate to a standard GAAP Taxonomy
Relief for liability if error is not materially misleading or false
XBRL Reports filed with the SEC
SEC Proposed Rule – Voluntary Reporting
SEC would like to study: Search capability of EDGAR database
Capability to perform financial comparisons amongst registrants
Ability to perform financial analysis (ratios, etc.)
Impact on staff’s ability to review filings more timely and efficiently
Use of tagged data for risk assessment
Compatibility of XBRL with other Commission requirements
Financial Reporting Process
Accounting/Finance
Investors/Analysts
Forms8-K
10-K10-Q
Sales
ERP
Legacy
HTML “View”
Word Summary
ExcelFinancials
Metrics, KPI’s
Regulatory Filing
Convert to ASCII/Text
Data “Cleansed”
XBRLDocuments
XBRL-enabled Software: Easing the Burden
Extend the taxonomy if Extend the taxonomy if necessarynecessary
Preparing XBRL Instance Documents
Create an instance document Create an instance document and validate calculationsand validate calculations
Publish Instance Document Publish Instance Document
& Taxonomy& Taxonomy
Compare & map Compare & map 10K/10Q to GAAP 10K/10Q to GAAP
TaxonomyTaxonomy
Assess Scope of Assess Scope of Reporting & Download Reporting & Download
TaxonomyTaxonomy
Review & Review & Validate Validate Instance Instance
DocumentDocument
Identify a team: Accountant & Identify a team: Accountant & Developer (XMLDeveloper (XML))
Output looks like this…..
More Importantly XBRL Output looks like this…..
Sample Form 8-K
edgr-20050228.xsdedgr-2005028_cal.xmledgr-2005028_lab.xmledgr-2005028_pre.xmlEDGR_2004_10K.xml
XBRL Sample Form 8-K Filing
EDGAR Online Facts….
Effort on Voluntary Filing Program 160+ Hours for first effort Over 200 discrete tagged items Over 30 Taxonomy extensions Instance document was reviewed 3X by three different people Used in-house conversion software to extend and tag plus 2
different tools to validate Did not include auditors for review
Created I-Metrix Excel Add-in
Was one of the first companies to make XBRL tagged financials available in Excel (I-Metrix)
Internal Considerations
Managing and maintaining XBRL taxonomies for internal/external reporting will require an ongoing effort
Implementing will impact the internal business rules governing data and the people who use/process it
Confusion over XBRL as an internal and/or external reporting solution
Enabled software – many vendors have enabled software, but others are in development
Existing business process will have to be re-examined as part of implementation for efficiencies and risk considerations
XBRL Taxonomy and Instance Document Applications
Benefits - How linked to XBRL initiative?
Timeliness
Capital markets rely on timely and reliable information for the allocation of capital resources
Comparability is enhanced across countries Access information more quickly Faster processing Accelerated filing deadlines can be easier to accomplish
Benefits - How linked to XBRL initiative?
Section 404/internal controls (SOX)
A reporting format such as XBRL could enable easier documentation of internal controls – less manual intervention and massaging
Can enable the integration of disparate systems to optimize the internal control process
Can be a critical tool for enabling compliance with 404 – monitoring can occur real time
Benefits - How linked to XBRL initiative?
Fair value accounting A lot of concern regarding the reliability (verifiability) of determining
appropriate fair value – if assumption disclosures were tagged – management’s choices would be more transparent to users and easily compared with others
Principles-based accounting standards If information is tagged – much easier to determine judgments
made by management – analysts could easily adjust for their own analysis
Comparability is enhanced across companies – makes management’s financial reporting choices more transparent – search facilitating technology
Benefits - How linked to XBRL initiative?
International Convergence
May be less important in an XBRL environment. Could adapt to country reporting regimes much more easily
Comparability is enhanced Complimentary toward objective of a single set of high quality,
understandable and enforceable global accounting standards
Summary : Benefits of XBRL for Preparers
Lower cost of producing information Better tools for faster decision making More timely accurate data XBRL provides an immediate ROI for benchmarking
Have a critical responsibility to communicate operational results to stakeholders Expanded communication “reach” Tell your own story to stakeholders (precise & clear)
Better control environment – extension of SOX 404 Utilized during risk assessment and planning phase Facilitate the comparability and granularity of financial
disclosure – comp analysis Accelerated adoption of reporting model changes
Questions?
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